[Subsidies Tied Up by WTO] ① Semiconductor Subsidies Blocked by 'WTO Risk'... "We Can't Delay Any Longer"

Concerns Over WTO Complaints When Providing Subsidies
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"Only We Are Excessively Conscious of WTO Rules" Criticized

The semiconductor industry’s desire for subsidy support is reportedly being blocked by the government’s concern over the World Trade Organization (WTO). The WTO restricts subsidy support to promote fair competition, and if the government provides direct financial support to the semiconductor industry, it could become a target of litigation. However, concerns are being raised that only South Korea is overly cautious about WTO regulations while semiconductor competitors like the United States and Japan are pouring money into nurturing their domestic industries.

Semiconductor. Photo by SK Hynix

According to political circles and the industry on the 4th, the ministries responsible for subsidy payments are reportedly examining the potential WTO risks from multiple angles. Since February, the Ministry of Trade, Industry and Energy has been investigating the latest subsidy trends in major countries worldwide through KOTRA’s overseas trade offices. The focus of these trends is said to be not only on the scale but also on the method of payment.

If our government provides subsidies, competing countries may file complaints against South Korea at the WTO. Subsidies are defined as obstacles that hinder fair trade under the “Agreement on Subsidies and Countervailing Measures” established by WTO member countries, and are prohibited under the name of “prohibited subsidies.” Accordingly, countries that become aware of subsidy payments by WTO member countries or suffer damage from them can request consultations with the relevant country, and if no agreement is reached within 30 days, the matter can be referred to the WTO Dispute Settlement Body.

South Korea became a WTO member when the organization was launched on January 1, 1995, and is subject to this agreement. The government hesitates to provide semiconductor subsidies, fearing that sanctions from the WTO could cause significant damage to the economy due to South Korea’s industrial structure, which is often described as a “trade-dependent country.” Currently, the government only offers semiconductor companies tax credits of up to 25% on facility investment costs without providing direct subsidies.

However, industry experts advise that considering the recent weakening of the WTO’s functions in the international community and the possibility of providing subsidies in ways that do not violate the agreement, subsidy payments should not be avoided. Professor Heo Yoon of Sogang University’s Graduate School of International Studies said, “The WTO now is like a court that lacks the capacity to conduct ‘second-instance trials,’ and even if a complaint is filed, it takes a long time to reach a ruling, so it is difficult to pressure other countries using the WTO complaint card.” He added, “Since major WTO countries like the United States are already ignoring WTO complaint regulations and providing massive subsidies to their domestic companies, the government should not delay introducing subsidy support policies out of concern for WTO complaints.”

This content was produced with the assistance of AI translation services.